tv [untitled] July 15, 2013 4:00pm-4:31pm PDT
submitted based upon their assumptions and the fact that the building is not profitable at 351 feet is simply not true. the project sponsor wants you to believe that he will [speaker not understood] this building at 351 feet. he will build it. he will [speaker not understood] about $150 million. and we firmly believe a approach to this building done by this commission is a far better solution than possibly three years of litigation and a ballot measure that may never allow this project to get built. that is not what we want and i don't believe what anybody wants. >> thank you. next speaker. [speaker not understood], 755 market street.
i agree and i concur with all the comments that have been made by my fellow resident and neighbors within 755 market street. i'm concerned about the height of the buildings [speaker not understood] to be constructed. i'm concerned about the traffic. i'm concerned about the pedestrian safety in the area. however, i want to say that i along with my fellow residents totally support the mexican museum that is to be constructed there. we are members of other museums in the area and when the mexican museum is constructed, we certainly will be members of that as well. i just would like to say that if this project goes ahead and if i look out my window and i
see this building going up and i see shadows going up over the areas that we have been talking about and i see traffic congestion and pedestrian problems that we've been talking about, i would feel very bad if i had not come here to speak to you and express my concerns about this project. i would like you to consider all aspects of it. think about the financial side of it as being discussed also as far as the project is concerned. thank you. >> thank you very much. next speaker. good afternoon, supervisors. my name is dave gonzalez. i'm a native san franciscan and an outside bar, i'd like to thank supervisor chiu coming to the celebration of long shore man. i'm former president of local 10.
i have some notes, but i hear a bunch of stuff about the buildings not matching what else is there. we're not the suburbs. this is san francisco. the buildings don't match. i don't know five buildings in any block this area of town that match. okay. it's an excellent plan. it's an excellent project. i don't know what everybody is concerned about the others. now you understand [speaker not understood] when we talk about foot traffic. our hiring hall for our jobs mostly in oakland is the fisherman's wharf. people get to where they need to go. i don't understand what the big hullabaloo is about. [speaker not understood] this is probably the largest group of people in this city, it's well deserved, it's been a long time coming. thank you. >> thank you very much. next speaker. good afternoon, supervisors. ame is alex [speak
understood], i'm speaking on behalf of union square life which is the ultimate [speaker not understood] in union square park. we are in support of the 706 mission project and the benefits to the surrounding community. we feel the project does not simply negative impact the union square park nor affect the public enjoyment. ~ of the park. we are concerned about the project's threatening of the [speaker not understood]. [speaker not understood] which is a tiny sliver of the very early hours only four weeks. year and being used as a laughable excuse for legislation that will tie up progress in the city immeasurably. [speaker not understood] based on union square shadow concerns. we urge the committee to approve this project and
encourage the opposition to not move forward with threats, to sponsor an unnecessary ballot measure that could be harmful to all of san francisco. thank you for your consideration. >> thank you very much. next speaker. david elliott lewis here. certainly i support the mexican museum and certainly i support this project and have no problems with its height. i do have concerns, however, when you look at the total budget of what's being spent including entitlements, we're talking about over half a billion dollars. i'm not talking about construction, i'm talking about everything. a half a billion dollars for a project that's actually over 500 feet when you consider the penthouses and yet when you look at the percentage of money actually going to museum, it's pretty small. and i think of chair wiener's point about nothing being spent on transit impact fees. i know that's part of a bigger problem. that's troubling. so, if you continue to just approve these projects without having any provision for
transit and this will create more need for transit, you basically kind of pushing the problem down the road and the problem of no transit impact fees being paid out of a half a billion dollar project, that's really troublesome. at some point, you know, the buck has to stop and you have to say, wait, we need to fix this problem about no transit impact fees being paid on such huge expensive development projects. and i also want to salute cpmc on van ness. again, the developer pays very little for transit on that one. so, thank you for your time and i hope you'll address this issue in future legislation. >> thank you. next speaker. [speaker not understood] supervisor wiener, supervisor kim, supervisor chiu, my name is rosario [speaker not understood] director of mexican language at [speaker not understood] school that is saving the mission district and
the city of san francisco for the past 45 years, providing work force development projects and health, hospitality, [speaker not understood], office technology, and graduated over 28,000 students, who are parents of our san francisco unified school district. as you may also know, i have been a member of the [speaker not understood] for 12 years. and i know how much time and work you have to invest, and i wanted to take this opportunity with everyone here speaking this afternoon to thank you for your work on behalf of our city. i'm here to ask you to take the necessary steps to make the mexican museum a reality. as an educator, i see things from the eyes of our children and young adults and, of course, the culture value of
the mexican museum will strengthen their [speaker not understood], sensitivity, and self-esteem that as you know, the children of our community needs so much. i know that you have to ask questions and do your homework, but at the end ~ i know you will support this project that will make the mexican museum a trust a reality. to the city, our children and to the latino community and to all of us. thank you very much. muchas gracias. >> thank you. next speaker. chair wiener, supervisors kim and chiu, victor marquez, i'm the general counsel of the mexican museum. i'd like to respond to a couple of things that have been raised. i ask for your indulgence, i may take up to 3 minutes. we have not had an opportunity
to speak to some of these legal issues. i'm former president of [speaker not understood], general counsel for seven years, national former president of the national bar association, the voice of the latino community throughout the united states. the current project before you is a culmination of years of good faith negotiations with representatives which have been completed on one hand the successor agency, the city through the department of real estate and the san francisco arts commission, and the mexican museum. on the other hand, we've had millennium partners. so, you had a number of very competent attorneys at the table negotiating with millennium partners and what we believe is an excellent deal. i have also sat with representatives of the city millennium park, representatives of the four seasons and under this roof. they did not want to negotiate in good faith, which is the legal standard when you enter into a room to negotiate. i can represent that to you and
to the world. instead, what you have heard today is the same thing we have heard inside a closed room, which is we want to make a federal case of this federal process and they want to threaten us with a ballot measure. that is not a healthy disposition, it is not a healthy attitude to move this project forward. the mexican museum has negotiated a good deal for a land value that has been the price of $15 million. we are getting $30 million in benefits which include the core and shell of the facility, which will be provided at no cost to us if it was built today. so, that will probably go up beyond the $25 million that we anticipate. plus an initial endowment of $5 million which will be broken up in three payments. i'll be done in 15 seconds. and then lastly -- >> mr. marquez, thank you. thank you. >> thank you. next speaker.
[speaker not understood]. friends of the mexican museum, which was started over a year ago to help the mexican museum in this process. i want to go back and give you a little historical story. in 1993, the redevelopment agency actually gave the land to the mexican museum. it took us years to finally get to the point where we could actually build something. in 2008, a proposal was put together to build with our partners the museum. at that time the height was 605, 605. in 2010, that was reduced to 5 20. and by 2012 ~ it was reduced again.
in 2013, in may of this year, its was tree deuced to 480. this project has been reduced, reduced, reduced. it's been five years now, okay. so, cost of construction goes up every day. this is a union job. second of all, you have the transbay plan that was approved by the planning department or the board of supervisors. it had buildings as high as 1,000 feet, 850 feet, 750 feet, you all approved those. they all created shadow. and yet shadow that we're talking about here at union square is 0.06, simple. the people who are here today who are opposing it, i thank you because i hear that they want to support the mexican museum and that's great.
unless they got $36 million if they collectively want to donate, [inaudible] for us to get this museum built. thank you. >> thank you very much. is there any additional public comment on item number 4? seeing none, public comment is closed. [gavel] >> colleagues, this matter is in the hands of the committee. supervisor kim. >> we did actually ask tiffany from the agency to respond. >> yes, that's correct. ms. bohe, and the project sponsor would like to respond after. >> thank you, supervisor, chair wiener, president chiu. in term of the review process for the financial feasibility as president chiu articulated, our role as the public agency, as the representative of the public agency, it review based on our own independent judgment, whatever information is brought forth by the developer and its consultants.
mr. lippe did articulate correctly, the developer hired economic planning systems to do a financial feasibility to analyze the project alternatives that were in the e-i-r. one of those project alternatives, 351-foot height, that's actually less than existing zoning. as confirmed by the planning department staff, existing zoning is 400 feet. then as the public agency, the successor agency, we engaged kaiser marsten associates to vet the assumptions and conclusions of the eps report which was sponsored by the developer. we came to the same conclusions. we vetted those assumptions and actually with permission from the committee to have mr. tim kelly from kaiser marston soresction to walk through the scope of his review. since that time he has looked at the sussman report which has been talked about by a number
of the sponsors to walk through his independent review of the judgment and peer review of the workout there. >> you may come forward. >> good afternoon, members of the board. i have copies here. >> you can hand them up through the clerk. >> so, my name is tim kelly. i'm president of kaiser marston soresction. as tiffany just explained, we did a peer review. let me give you a background about who we are. we have been in san francisco for almost 40 years, actually 40 years. we were founded here.
we're a real estate consulting firm that works primarily with public agencies on doing public private partnerships and we've successfully done that for about 30 years here. ~ we have evaluated real estate in san francisco for well over 30 years. and we are working around the transbay terminal on the residential towers that are coming in there. we've worked on nine of those different towers on three different sites. our assignment in this exercise is to do a peer review of the feasibility analysis that was prepared by eps for reasonableness. the project alternatives were those provided in the e-i-r and we are not asked -- we were not asked to come up with new alternatives. i would like to say the millennium partners are considered a pre-imminent national developer [speaker not understood] condominium towers. they obviously have tremendous experience, know what they're doing in terms of maximizing
projects and having a successful project. we looked to 301 mission which is the existing millennium tower to look at sales prices to compare those because that just completed selling at the first quarter of 2013. it started much earlier than that, but it finished in the beginning of this year. in terms -- i refer to them as sussman with the ucla professor. obviously we agreed pricing is the most important variable, no question about it. and pricing is dramatically affected by views. the 351 height is equivalent to 27 floors, okay. so, the information provided us by the sponsor is that you do not get above to the premium views till you're above 25 floors. so, the way 25 floors, you might have views to the east to
the water, to the southeast to the water, back over yerba buena gardens, but you do not have the premium views that you would have on the higher floors of millennium tower. so, not to besiege you with a bunch of numbers, but the top of page 3 gives you a sense of the price per square foot projections that were provided by the three -- two, and i added three at 1 mission. you can see how the pricing varies through at 1 mission is the lowest, the eps projection was higher and sussman's projection was higher. let me just explain to you what this all means. this is the table [speaker not understood]. sussman's projections has an average price for 27 floor tower of $3.4 million. they are projecting or he is projecting starting more or less at the third floor a $3 million condominium sale.
as a result of that, he has very high sale signs. $3 million in the millennium tower was not exceeded to above the 40th floor. now, prices have increased, but it takes $3 million down below where 25 floors is a stretch. the sussman feasibility and $100 million profit is based on average sales price in a 27 foot tower of $3.4 million. it's also the project sponsor did a modified proposal with 43 stories. the revenue in that which is at the bottom of this page 3, the revenue potential was $510 million and sussman in 27,4 has 51 1 despite having 16 floors less, the difference between 27 and 43.
of those are the most valuable units. so, first upon the community benefits package that this project has to do, and the fact that the more floors built, you can spread that cost. if you look at the sales to 301 mission and you train them for time, however you want to do that, we still conclude that the 27th floor alternative is not a viable alternative. what i gave to you, what i just handed out was a little short four-page memo in that. and there is a much longer memorandum prepared by eps addressing the factors that were mentioned by the attorney for the opponents. so, at that point i'll just let you ask questions. >> supervisor chiu. >> one question. so, right now the delta is gwen the 27 floor version and the 43 floor version.
do you think there is anything in between that is feasible. you know, a good question, isn't it? you know, i don't have an answer for you standing here. it is a balance between -- you're on community benefits. the community benefits are going to be provided whether it's a 27 story floor or a 40. and, so, you need to have a clear statement of what those community benefits are going to be and what they're going to cost. i mean, maybe it's being tested around the edges saying extra cost burks that needs to be in balance with the height. the analysis done by eps i believe had a gap of less than -- an excess profit of somewhere around 10 to $15 million on $43 million, over the 18% cost market. other than that, i don't have an answer for you. i can't stand here and say 40 is the right number.
>> it's possible it's probably somewhere between 27 and 43 maybe? >> i think we are strongly taking the position that 27 does not work. >> sure. >> 30 does not work, i don't think. you're up there. again, in balance with the community benefit package. >> a 32 could work, 35 -- you just don't know at this point? >> we're not here to make a recommendation. i would say the margin that's left with the eps analysis does not lend to [speaker not understood], i'll say that. >> thank you. >> thank you. supervisor kim. >> thank you. i appreciate your response. i think, you know, predicting per square footage it's very hard to do and i imagine we can have 10 different reports on what that would look like. i just want to -- understanding those types of pro dixons, what i did want to ask about were the assumptions, that is something i feel like there is
a little bit more concrete, concreteness to. ~ predictions they use larger numbers of small units instead of larger numbers of small units. that's one question i have which may or may not increase construction costs and, of course, may increase your affordable housing fee per square footage because unfortunately we do off-site in lieu fee based on the number of units, not based on either the value or the size. and the second issue -- the third issue that was brought up was the lower efficiency ratio, you know, in terms of the highlighted common area space, residential. my question is more on the assumptions [speaker not understood]. >> yeah. i understand those comments. you can kind of get caught up in all the numbers. there's a lot of numbers. i think you need to recognize
and you can address [speaker not understood]. but you need to recognize the average sales in the millennium tower 301, the 27th floor less than a million and a half dollars in the last four months of sales. the projection here for the entire building by the ucla professor is 33.4, it's over twice. so, regardless of efficiencies, regardless of [speaker not understood], regardless, i mean, i don't know how you get the doubling the price of a per unit -- even if you accept, you know, instead of 76, you can sell 80%. instead of the average unit size build 1300, you build 1800. the question is do you believe that you can sell a condominium on the third floor at $3 million? you know, i don't think you can. or the fourth floor or the fifth floor. that's basically what's being proposed. so, those other variables
[speaker not understood], the price cap that you have to deal with and we look at the experience of 301 mission to look at that. so, that's my response to that if that helps: >> thank you. >> in terms of the bottom line, i'm sure you heard that [speaker not understood] talk about the ucla study which showed that at, i guess 350 feet, the total net profit to the developer would be 150 million. >> yeah, okay, so -- >> i don't see that bottom line here. maybe i'm missing it. >> if you go to the bottom of page 3, the residential sales -- the residential sales here for the sussman proposal is $51 1 million and the 27-story building. we're saying you can't get to that number, therefore, you can't get to the $100 million
surplus profit. that number is based upon $3.4 million average sales per unit in a 27-floor tower. the actual sales are going to be substantially less. >> do you have an opinion about what the net profit would be at 350 feet? i'm just trying to compare apples to apples. ucla, i guess *e, concluded it would be at 351 feet, i guess it would be 150 million. and my question is comparing apples to apples -- >> yeah. so, the original peer review report had a number in there -- yeah, peer review. original eps report had a peer review number, it's negative. i can look it up. but it's not a positive number at 27 floors, 351 feet.
given the community benefits that you have to pay for, it is not -- the number is negative. i'd have to have -- >> do you agree with that number? >> yes. the answer to your question back, just to be clear. the opponents are saying 27.4 project can generate 100 million in sales -- assessed revenues, provided you can generate half a billion dollars in sales, provided that you can sell on average every unit for 3.4 million when in fact at 301 mission under 27 floors, the average unit sells for less than a million and a half. and it didn't hit 3 million till really about 30 stories. >> so, you would disagree with the ucla report's assumptions about pricing of the units? >> exact -- >> any other significant disagreements with their methodology? [multiple voices]
>> the overriding assumption, i think the rest of it is sort of -- let me say it differently. if millennium [speaker not understood], if millennium thought they could build a $3 million unit and felt they could sell it on the third floor, i believe they would do t. and i don't think they can do t. those are what the assumptions are and i don't agree with it. >> does anything else come to your mind in terms of things in your mind wrong about the ucla report other than the pricing assumptions? >> i think it's all biased by the pricing, yeah. well -- there are some other subtlies. but the pricing is so overwhelming that drives the analysis. >> okay, thank you very much. does the public sponsor want to add anything in terms of the income projections or that sufficient? okay, we'll leave it at that, then. thank you very much. thank you, ms. bohey. colleagues, now it's truly back
in the hands of the committee. president chiu. >> thank you. first of all, i want to thank all the members of the public that have come out to testify today. this has been a challenging development to assess. and let me first start as i had said before, i think it's true for many of us, i am a strong supporter of the mexican museum. i think it is critical we anchorv this cultural institution in a building that well deserves it and i very much want to figure out how we make this happen. with that being said, nothing in san francisco development is easy. when the e-i-r is in front of the board of supervisors a few weeks ag i mentioned two issues with the rest of the project beyond the mexican museum that i had, questions about that which impact my district. one of which i think has been fairly well addressed and that has been around traffic congestion particularly along 3rd street and mission going into my neighborhoods. i definitely support mitigation efforts the developer has made
and yet is currently embodied in the proposal. and i do think it is close to a resolution. the second which is no surprise obviously has not been resolved yet, is the issue around parks and shadows. let me say a couple things which i've said to both sides of this issue. i think a lot of folks know my district and the neighborhoods i represent have the least amount of open space in the city. and despite proposition k in the 1908s where voters said we need significant and careful thought around new shadows and parks in the most dense neighborhoods in the city, many of our parks have been incrementally shadowed over time. and legality me give some examples of the drifting shadows, and this is a document from project supporters. herman plaza, 87% shadowing, [speaker not understood] in my district 39%. st. mary's and willie-willie wong, soviet union i don't know square as everyone knows is 38.3% shadow [speaker not understood]. so, on the one hand i do think it's important that we